US shale producers are on course to make nearly $200 billion this year, enough to make the industry debt-free by 2024 and potentially fund a pivot toward more natural gas production, according to Deloitte LLP.
The key difference with this year’s oil and gas boom is not so much high prices, but the industry’s lack of capital expenditure compared with historical norms. Global operators are spending about 60% less on oil and gas production projects now than they were in 2014, the last time oil was trading around $100 a barrel, Deloitte’s data show.
“Investments are decoupling from oil prices and capex discipline is now a norm,” the report said.
The trend is most powerfully seen in US shale, which burned through about $300 billion of cash from 2010 to 2019. But for those companies that survived the pandemic, the bounty is well and truly here. The industry will have made back that entire loss in 2021 and 2022, with further profits on the horizon for the rest of the decade.
Buffett has probably noticed the improved capital spending discipline and is anticipating a gusher of cash flowing from OXY and CVX.